PACS Group, Inc.

Previous wording

We are a leading post-acute healthcare company primarily focused on delivering high-quality skilled nursing care through a portfolio of independently operated facilities. Founded in 2013, we are one of the largest skilled nursing providers in the United States based on number of facilities. We also provide senior care, assisted living, and independent living options in some of our communities. As of September 30, 2025, our portfolio consisted of 320 post-acute care, assisted living, and independent living facilities across 17 states serving over 31,100 patients daily. We believe our significant historical growth has been primarily driven by our expertise in acquiring underperforming long-term custodial care skilled nursing facilities and transforming them into higher acuity, high value-add short-term transitional care skilled nursing facilities. We believe our success is driven in significant part by our decentralized, local operating model, through which we empower local leaders at each facility to operate their facility autonomously and deliver excellence in clinical quality and a superior experience for our patients. We provide our independently operated facilities with a comprehensive suite of technology, support, and back-office services that allow local leadership teams to focus more of their time and effort on providing quality care to patients. We believe our operating model delivers value to all of our healthcare stakeholders, including patients and families, referring providers, payors, and administrators and clinicians.

Current wording

We are a leading post-acute healthcare company primarily focused on delivering high-quality skilled nursing care through a portfolio of independently operated facilities. Founded in 2013, we are one of the largest skilled nursing providers in the United States based on number of facilities. We also provide senior care, assisted living, and independent living options in some of our communities. As of March 31, 2026, our portfolio consisted of 323 post-acute care, assisted living, and independent living facilities across 17 states serving over 31,900 patients daily. We believe our significant historical growth has been primarily driven by our expertise in acquiring underperforming long-term custodial care skilled nursing facilities and transforming them into higher acuity, high value-add short-term transitional care skilled nursing facilities. We believe our success is driven in significant part by our locally led, centrally supported operating model, through which we empower local leaders at each facility to operate their facility autonomously and deliver excellence in clinical quality and a superior experience for our patients. We provide our independently operated facilities with a comprehensive suite of technology, support, and back-office services that allow local leadership teams to focus more of their time and effort on providing quality care to patients. We believe our operating model delivers value to all of our healthcare stakeholders, including patients and families, referring providers, payors, and administrators and clinicians.

Previous wording

We aim to create value by identifying and acquiring underperforming custodial care facilities and converting them into higher-value short-term transitional care facilities by investing in clinical teams and processes and upgrading technology, equipment, training, staffing, aesthetics, and other aspects of the business. We believe the resources and guidance offered by PACS Services is key to rapid integration of new facilities and provides our local leadership teams with an effective technology infrastructure, support tools, and regional support teams that allow local leadership to focus on operational improvements. Our facilities generally undergo an up to three-year post-acquisition transition period. During this period, we seek to implement best practices designed to realize and sustain the facility’s full potential. These practices often result in significant improvements to clinical quality and other operational metrics, including skilled mix, occupancy rates and payor contracting. We believe the results of our acquisition strategy are demonstrated by our high average QM Star rating and occupancy rate for Mature facilities of 4.3 and 95%, respectively, as of September 30, 2025. As of September 30, 2025, the average QM Star rating and occupancy rate for New facilities, which we define as facilities purchased less than 18 months prior to the measurement date, was 3.3 and 81%, respectively.

Current wording

We aim to create value by identifying and acquiring underperforming custodial care facilities and converting them into higher-value short-term transitional care facilities by investing in clinical teams and processes and upgrading technology, equipment, training, staffing, aesthetics, and other aspects of the business. We believe the resources and guidance offered by PACS Services is key to rapid integration of new facilities and provides our local leadership teams with an effective technology infrastructure, support tools, and regional support teams that allow local leadership to focus on operational improvements. Our facilities generally undergo an up to three-year post-acquisition transition period. During this period, we seek to implement best practices designed to realize and sustain the facility’s full potential. These practices often result in significant improvements to clinical quality and other operational metrics, including skilled mix, occupancy rates and payor contracting. We believe the results of our acquisition strategy are demonstrated by our high average QM Star rating and occupancy rate for Mature facilities, which we define as facilities purchased greater than 36 months prior to the measurement date, as compared to the same metrics for our New facilities, which we define as facilities purchased less than 18 months prior to the measurement date. As of March 31, 2026, our average QM Star rating and occupancy rate for Mature facilities were 4.4 and 95%, respectively, compared to 3.6 and 83%, respectively for New facilities as of the same date.

Previous wording

Large, Fragmented Industry Comprised of Mostly Small and Independent Operators. According to the National Center for Health Statistics (NCHS) 2020 National Post-acute and Long-term Care Study, the SNF industry in the United States encompasses approximately 15,000 facilities and serves approximately 1.3 million patients annually. The industry is highly fragmented, with the top 10 operators, each having greater than approximately 100 facilities, representing approximately 11% of total number of SNFs in the United States, according to CMS data as of September 2024, approximately 5,000 smaller and independent operators of less than 100 facilities making up the remainder. According to this data, approximately 73% and 27% of SNFs are located in urban and rural areas, respectively. In addition, approximately 73%, 21%, and 6% of SNFs are operated as for-profit, non-profit, and by the government, respectively, according to such data. We believe this fragmented landscape creates opportunities for larger providers with greater scale to serve patients better and meet regulatory requirements nation-wide by effectively addressing staffing, quality standards, and billing processes. In addition, due to the increasing demands from hospitals and insurance carriers to implement sophisticated and expensive reporting systems, we believe this fragmentation provides us with significant acquisition and consolidation opportunities.

Current wording

Large, Fragmented Industry Comprised of Mostly Small and Independent Operators. According to the National Center for Health Statistics (NCHS) 2020 National Post-acute and Long-term Care Study, the SNF industry in the United States encompasses approximately 15,000 facilities and serves approximately 1.3 million patients annually. The industry is highly fragmented, with the top 10 operators, each having greater than approximately 100 facilities, representing approximately 11% of the total number of SNFs in the United States, according to CMS data as of September 2024, and approximately 5,000 smaller and independent operators of less than 100 facilities making up the remainder. According to such data, approximately 73% and 27% of SNFs are located in urban and rural areas, respectively. In addition, approximately 73%, 21%, and 6% of SNFs are operated as for-profit, non-profit, and by the government, respectively, according to such data. We believe this fragmented landscape creates opportunities for larger providers with greater scale to serve patients better and meet regulatory requirements nation-wide by effectively addressing staffing, quality standards, and billing processes. Moreover, many small and independent operators face pressure due to billing requirements, regulations, competition on quality of care and facilities, staffing shortages and competition, and the cessation of COVID-related provider relief funding, which has led them to pursue sales of their facilities or businesses. This provides additional opportunity for well-managed, high-quality operators to grow through acquisitions.

Previous wording

Growing Demand Outpacing Supply of Skilled Nursing Facilities. The demand for healthcare services in the United States has increased in recent years and is expected to continue growing, largely due to a rapidly aging population and an increasing prevalence of chronic conditions. While demand has increased for SNFs, the number of SNFs has declined in recent years from approximately 15,650 in 2017 to approximately 14,800 in 2024. We believe this is due to a variety of factors, including an inability of many facilities to comply with the industry’s stringent regulatory compliance obligations and with quality standards, rigorous staffing, and billing requirements, as well as a lack of technology and sophistication at small and independent operators. Furthermore, new operators to this highly regulated industry face multiple barriers to entry, including the requirements to obtain a Certificate of Need, complex licensure and regulatory compliance requirements, lack of operating experience, and significant capital requirements. As a result, the addition of new SNFs has not kept pace with the number of SNFs exiting the market, amplifying the need for skilled nursing to serve an aging population.

Current wording

Growing Demand Outpacing Supply of Skilled Nursing Facilities. The demand for healthcare services in the United States has increased in recent years and is expected to continue growing, largely due to a rapidly aging population and an increasing prevalence of chronic conditions. While demand has increased for SNFs, the number of SNFs has declined in recent years from approximately 15,650 in 2017 to approximately 14,740 in 2025. We believe this is due to a variety of factors, including an inability of many facilities to comply with quality standards, rigorous staffing, and billing requirements, and a lack of technology and sophistication at small and independent operators. Furthermore, new operators face multiple barriers to entry, including the requirements to obtain a Certificate of Need, complex licensure requirements, lack of operating experience, and significant capital requirements. As a result, the addition of new SNFs has not kept pace with the number of SNFs exiting the market, amplifying the need for skilled nursing to serve an aging population.

Previous wording

Favorable Reimbursement Environment. According to CMS, approximately 72% of SNF revenue in 2022 was derived from government sources, including Medicaid and Medicare. Medicaid represents 51% of industry revenue, while Medicare represents approximately 21%. The remainder comprises managed care, private pay, and other payors. Medicare and Medicaid reimbursement has steadily increased over the past few years. Medicare reimbursement per patient day increased at a CAGR of approximately 3.6% from 2012 to 2021, while Medicaid reimbursement per patient day increased at a CAGR of approximately 1.9% from 2012 to 2021. During that time, the industry experienced over 9 years of growth in reimbursement rates.

Current wording

Favorable Reimbursement Environment. According to CMS, approximately 72% of SNF revenue in 2022 was derived from government sources, including Medicare and Medicaid. Medicare represents 21% of industry revenue, while Medicaid represents 51%. The remainder comprises managed care, private pay, and other payors. Medicare and Medicaid reimbursement has steadily increased over the past few years. Medicare reimbursement per patient day increased at a CAGR of approximately 3.4% from 2012 to 2023, while Medicaid reimbursement per patient day increased at a CAGR of approximately 1.9% from 2012 to 2021. During that time, the industry experienced continued growth in reimbursement rates.

Previous wording

Regulatory Environment. The SNF industry is highly regulated with stringent regulatory compliance obligations. In the ordinary course of business, providers are subject to federal, state and local laws and regulations relating to, among other things, billing and reimbursement, relationships with vendors, business relationships with physicians and other healthcare providers and facilities, as well as licensure, accreditation, enrollment, quality, adequacy of care, physical plant, life safety, personnel, staffing and operating requirements. Changes in law or new interpretations of existing laws and regulations may have a significant impact on revenue, costs and business operations of providers and other industry participants. In addition, governmental and other authorities periodically inspect the SNFs, senior living facilities and outpatient rehabilitation agencies to verify continued compliance with applicable regulations and standards and may impose citations and other regulatory penalties for regulatory deficiencies. Such regulatory penalties include but are not limited to civil monetary penalties, temporary payment bans, suspension or revocation of a state operating license and loss of certification as a provider in the Medicare or Medicaid program, which may be temporary or permanent in nature. This regulatory environment and related enforcement can have an adverse effect on providers and other industry participants. See the section titled “Regulatory Matters.”

Current wording

Regulatory Environment. The SNF industry is highly regulated with stringent regulatory compliance obligations. In the ordinary course of business, providers are subject to federal, state and local laws and regulations relating to, among other things, billing and reimbursement, relationships with vendors, business relationships with physicians and other healthcare providers and facilities, as well as licensure, accreditation, enrollment, quality, adequacy of care, physical plant, life safety, personnel, staffing and operating requirements. Changes in law or new interpretations of existing laws and regulations may have a significant impact on revenue, costs and business operations of providers and other industry participants. In addition, governmental and other authorities periodically inspect the SNFs, senior living facilities and outpatient rehabilitation agencies to verify continued compliance with applicable regulations and standards and may impose citations and other regulatory penalties for regulatory deficiencies. Such regulatory penalties include but are not limited to civil monetary penalties, temporary payment bans, suspension or revocation of a state operating license and loss of certification as a provider in the Medicare or Medicaid program, which may be temporary or permanent in nature. This regulatory environment and related enforcement can have an adverse effect on providers and other industry participants.

Previous wording

During the nine months ended September 30, 2025, we expanded our operations with the addition of four stand-alone skilled nursing operations and three assisted living and independent living facilities all of which were acquired through long-term leases. We also made five real estate purchases. For each of these five acquired properties, the Company previously operated the respective facilities and has now acquired the real estate associated with those operations. These new operations added a total of 495 skilled nursing beds and 271 assisted living beds to be operated by our affiliated operating subsidiaries. Additionally, during the same period the Company disposed of one facility including 120 skilled nursing beds.

Current wording

During the three months ended March 31, 2026, we expanded our operations with the addition of three assisted living and independent living facilities, two of which were acquired in conjunction with the real estate for the properties and one of which we acquired through a long-term lease. These new operations added a total of 234 assisted living beds to be operated by our affiliated operating subsidiaries. We also made one additional real estate purchase. Regarding this property, the Company previously operated the facility and has now acquired the real estate associated with the operations. Additionally, during the same period the Company died of one facility including 110 skilled nursing beds.

Previous wording

•Skilled mix — We measure both revenue and nursing patient days by payor. Medicare and managed care patients, whom we refer to as high acuity patients, typically require a higher level of skilled nursing care. As a result, Medicare and managed care reimbursement rates are typically higher than those from other payors. In most states,

Current wording

•Skilled mix — We measure both revenue and nursing patient days by payor. Medicare and managed care patients, whom we refer to as high acuity patients, typically require a higher level of skilled nursing care. As a result, Medicare and managed care reimbursement rates are typically higher than those from other payors. In most states, Medicaid reimbursement rates are generally the lowest of all payor types. Changes in the payor mix can significantly affect our revenue and profitability. To monitor this performance, we evaluate two different measures of skilled mix:

Previous wording

•Number of facilities — The total number of skilled nursing facilities that we operate. Excludes 30 and 27 assisted living and independent living facilities for the nine months ended September 30, 2025 and 2024, respectively.

Current wording

•Number of facilities — The total number of skilled nursing facilities that we operate. This figure excludes 33 and 27 assisted living and independent living facilities for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

•Average daily rates — The routine revenue by payor source for a period at the skilled nursing facilities divided by actual patient days for that revenue source for that given period. Revenue associated with calculating average daily rates is based on contractually agreed-upon amounts or rates, excluding the estimates of variable consideration under ASC 606. These rates also exclude additional state relief funding, which includes payments we recognized as part of The Families First Coronavirus Response Act (FFCRA).

Current wording

•Average daily rates — The routine revenue by payor source for a period at the skilled nursing facilities divided by actual patient days for that revenue source for that given period. Revenue associated with calculating average daily rates is based on contractually agreed-upon amounts or rates, and does not include the estimates of variable consideration under ASC 606.

Previous wording

The following tables present the above key skilled services metrics by category for all facilities, Mature facilities, Ramping facilities, and New facilities as of and for the nine months ended September 30, 2025 and 2024:

Current wording

The following table presents the above key skilled services metrics by category for all skilled nursing facilities in operation on January 1, 2025, excluding divestitures since that time, as of and for the three months ended March 31, 2026 and 2025:

Previous wording

EBITDA –We calculate EBITDA as net income, adjusted for net (loss) income attributable to noncontrolling interest, before: interest expense; provision for income taxes; and depreciation and amortization.

Current wording

EBITDA –We calculate EBITDA as net income, adjusted for net losses attributable to noncontrolling interest, before: interest expense; provision for income taxes; and depreciation and amortization.

Previous wording

Adjusted EBITDA –We calculate Adjusted EBITDA as EBITDA further adjusted for non-core business items, which for the reported periods includes, to the extent applicable, costs incurred to acquire operations that are not capitalizable, gains on lease termination, stock-based compensation expense, loss from equity method investment, forfeiture of a seller’s note, recognition of a bargain purchase gain, legal and other costs, and certain one-time expenses that are not representative of our underlying operating performance. Costs related to acquisitions include costs related to our acquisition of SNF facilities and providers, including related costs such as legal fees, financial and tax due diligence, consulting and escrow fees. The loss related to our equity method investment is a loss allocated to us from a discrete disposal recognized by one of our equity method investments. Legal and other costs include legal and professional fees incurred associated with the Audit Committee’s independent investigation and with other ongoing investigations.

Current wording

Adjusted EBITDA –We calculate Adjusted EBITDA as EBITDA further adjusted for non-core business items, which for the reported periods includes, to the extent applicable, costs incurred to acquire operations that are not capitalizable, stock-based compensation expense, legal and other costs, and certain one-time expenses that are not representative of our underlying operating performance. Costs related to acquisitions include costs related to our acquisition of operations, including related costs such as legal fees, financial and tax due diligence, consulting and escrow fees. Legal and other costs include legal and professional fees incurred associated with the Audit Committee’s independent investigation during the years ended December 31, 2025 and 2024, and with other ongoing investigations.

Previous wording

Adjusted EBITDAR –We calculate Adjusted EBITDAR as Adjusted EBITDA less rent-cost of services.

Current wording

Adjusted EBITDAR –We calculate Adjusted EBITDAR as Adjusted EBITDA plus rent-cost of services.

Previous wording

The table below presents a reconciliation of EBITDA, Adjusted EBITDA, and Adjusted EBITDAR to net income, the most directly comparable financial measure calculated in accordance with GAAP, on a consolidated basis for the periods presented:

Current wording

The table below presents a reconciliation of EBITDA, Adjusted EBITDA, and Adjusted EBITDAR to net income, the most directly comparable financial measure calculated in accordance with GAAP, on a condensed consolidated basis for the periods presented:

Previous wording

Patient and resident service revenue typically represents over 99% of our total revenue. Patient and resident service revenue comprises skilled nursing services revenue, revenue generated from our senior assisted living services and revenue generated from certain ancillary services provided outside of routine contractual agreements. For the nine months ended September 30, 2025 and 2024, skilled nursing services revenue represented over 97% of patient and resident service revenue.

Current wording

Patient and resident service revenue typically represents over 99% of our total revenue. Patient and resident service revenue comprises skilled nursing services revenue, revenue generated from our senior assisted living services and revenue generated from certain ancillary services provided outside of routine contractual agreements.

Previous wording

Other revenue relates to ancillary revenue generating activities and primarily consists of revenue associated with arrangements in which we are a lessor of certain facilities. Other revenue typically represents an immaterial portion of our total revenue and we expect this to continue for the foreseeable future.

Current wording

Other revenue primarily consists of revenue associated with arrangements in which we are a lessor of certain facilities or office space. Other revenue typically represents an immaterial portion of our total revenue and we expect this to continue for the foreseeable future.

Previous wording

Our cost of services represents the costs of operating our operating subsidiaries, which primarily consist of payroll and related benefits, supplies, purchased services, and ancillary expenses such as the cost of pharmacy and therapy services provided to patients. Cost of services also includes the cost of general and professional liability insurance, rent expenses related to leasing our operational facilities (such as taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements), dietary services, contracted services and other administrative general cost of services with respect to our operations. As we continue to execute on our acquisitions strategy and grow our business, we expect that our cost of services will continue to increase.

Current wording

Our cost of services represents the costs of operating our operating subsidiaries, which primarily consist of payroll and related benefits, supplies, purchased services, and ancillary expenses such as the cost of pharmacy and therapy services provided to patients. Cost of services also includes the cost of general and professional liability insurance, rent expenses related to leasing our operational facilities (such as taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements), dietary services, contracted services and other administrative general cost of services with respect to our operations.

Previous wording

Rent - cost of services consists solely of base rent amounts payable under lease agreements to third-party real estate owners. Our operating subsidiaries lease and operate, but do not own the underlying real estate of, 269 facilities and these amounts do not include taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements. As we continue to execute on our acquisitions strategy and expand our network of facilities, we expect that our rent - cost of services will continue to increase.

Current wording

Rent - cost of services consists of base rent amounts payable under lease agreements to third-party real estate owners. Our operating subsidiaries lease and operate, but do not own the underlying real estate of, 267 facilities and these amounts do not include taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements.

Previous wording

General and administrative expense consists primarily of payroll and related benefits and travel expenses for our PACS Services personnel, including training and other operational support. General and administrative expense also includes professional fees (including accounting and legal fees) and costs relating to our information systems. Historically, our general and administrative expense has not included any stock-based compensation. In connection with our IPO in April 2024, we adopted the 2024 Plan and the 2024 ESPP. From this point forward, our general and administrative expense includes stock-based compensation.

Current wording

General and administrative expense consists primarily of payroll and related benefits and travel expenses for our PACS Services personnel, including training and other operational support. General and administrative expense also includes stock-based compensation expense, professional fees (including accounting and legal fees), and costs relating to our information systems.

Previous wording

Other (expense) income, net consists primarily of interest expense related to our debt, as well as income from gains and losses from investments in partnerships, and gains from lease termination.

Current wording

Other expense, net consists primarily of interest expense related to our debt, gains and losses related to asset disposals, and gains and losses from investments in partnerships and other investments.

Previous wording

Patient and resident service revenue - Patient and resident service revenue increased by $320.0 million to $1.3 billion for the three months ended September 30, 2025, a 31.2% increase compared to the three months ended September 30, 2024. For the three months ended September 30, 2025 and 2024, skilled nursing services revenue represented more than 97% of patient and resident service revenue.

Current wording

Patient and resident service revenue - Patient and resident service revenue increased by $143.0 million to $1.4 billion for the three months ended March 31, 2026, an 11.2% increase compared to the three months ended March 31, 2025. For the three months ended March 31, 2026 and 2025, skilled nursing services revenue represented more than 97% of patient and resident service revenue.

Previous wording

Skilled nursing services revenue increased by 29.8%, or $300.7 million, to $1.3 billion for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. This change was driven by an increase in patient days of 492,601, or 22.7%, primarily due to an increase in operational beds of 5,210, or 19.0%, from September 30, 2024 to September 30, 2025. New and Ramping facilities experienced a decrease in occupancy, from 82.8% and 93.9%, respectively, for the three months ended September 30, 2024 to 80.6% and 86.1%, respectively, for the three months ended September 30, 2025. The combined occupancy rate across all facilities of 89.0% for the three months ended September 30, 2025, reflects a decrease compared to 90.5% for the three months ended September 30, 2024. The decrease in New and Ramping facility cohort occupancy rates was offset by a small increase in the Mature facility cohort occupancy rate which grew by 0.3% to 94.8% for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Current wording

On a cohort basis, New and Ramping facilities experienced an increase in occupancy, from 81.8% and 86.4%, respectively, for the three months ended March 31, 2025 to 82.7% and 88.9%, respectively, for the three months ended March 31, 2026. The increase in New and Ramping facility cohort occupancy rates was offset by a slight decrease in the Mature facility cohort occupancy rate which declined by 0.7% to 94.8% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decline is due, in part, to the shift of facilities in each cohort over time. The occupancy rate of each cohort is above the industry average of 79.0%.

Previous wording

Our skilled nursing services revenue was impacted by fluctuations in our payor source mix. Our average Medicare daily rates primarily remained consistent, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024.

Current wording

Our skilled nursing services revenue is impacted by fluctuations in our payor source mix. Additionally, our average Medicare daily rates increased by 1.3% for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Previous wording

Our average Medicaid rates increased 6.7% due to state reimbursement increases and our participation in supplemental Medicaid payment programs and quality improvement programs in various states. Medicaid rates exclude the amount of state relief revenue we recorded.

Current wording

Our average Medicaid rates increased 4.1% due to state reimbursement increases and our participation in supplemental Medicaid payment programs and quality improvement programs in various states. Medicaid rates exclude the amount of state relief revenue we recorded.

Previous wording

Other revenue - Other revenue decreased by $1.8 million for the three months ended September 30, 2025 compared to the same period in the prior year due to a change in lease income over these periods.

Current wording

Other revenue - Other revenue increased by $0.4 million for the three months ended March 31, 2026 compared to the same period in the prior year due to a change in lease income over these periods.

Previous wording

Cost of services increased by $196.7 million to $1.0 billion, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The 23.1% increase was primarily driven by an increase of $129.9 million in salaries and wages. Our total number of post-acute care facilities, inclusive of skilled nursing facilities and assisted living facilities, increased from 276 as of September 30, 2024 to 320 as of September 30, 2025, an increase of 15.9%. Of the salaries and wages increase, those attributable to New facilities purchased after September 30, 2024 accounted for $68.1 million, or 52.4% of the increase. Headcount and operational changes attributable to Ramping and Mature facilities accounted for the remaining change in salaries and wages. Aside from labor costs, the increase in cost of services was due to increases of $24.8 million in contracted services; $15.1 million in nursing and dietary expenses; and $9.9 million in administrative expenses for facilities. The remaining change in cost of services was spread out across various expense types.

Current wording

Cost of services increased by $50.7 million to $1.1 billion, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The 5.0% increase was primarily driven by an increase of $39.5 million, or 6.2%, in salaries and wages. Our total number of post-acute care facilities, inclusive of skilled nursing facilities and assisted living facilities, increased 2.5% from 315 as of March 31, 2025, to 323 as of March 31, 2026. Of the salaries and wages increase, those attributable to New facilities purchased after March 31, 2025 accounted for $13.4 million, or 34.0% of the increase in salaries and wages. Headcount and operational changes attributable to Ramping and Mature facilities accounted for the remaining change in salaries and wages. Aside from labor costs, the increase in cost of services was due to increases of $3.9 million in contracted services; $3.4 million in nursing and dietary expenses; and $2.0 million in administrative expenses for facilities. The remaining change in cost of services was spread out across various expense types.

Previous wording

Rent - cost of services increased to $95.1 million for the three months ended September 30, 2025, compared to $72.6 million for the three months ended September 30, 2024. The increase was primarily attributable to the addition of new facilities with operating leases midway through, and subsequent to, the three months ended September 30, 2024, as well as to annual escalators on existing facilities' rent.

Current wording

Rent - cost of services increased to $95.5 million for the three months ended March 31, 2026, compared to $93.8 million for the three months ended March 31, 2025. The increase was primarily attributable to the addition of new facilities with operating leases since March 31, 2025, as well as to annual escalators on existing facilities' rent.

Previous wording

General and administrative expense increased by $47.4 million, to $301.6 million for the nine months ended September 30, 2025, compared to $254.2 million for the nine months ended September 30, 2024. The change was driven by an increase in salaries and wages of $31.1 million, or 28.3%, due to growth in operations, and an increase in costs associated with professional fees within general and administrative expense in the current year including a $66.5 million increase in legal expenses associated with the Audit Committee’s independent investigation and with ongoing government investigations. This increase was offset by a change in stock compensation expense recognized during the year, associated with restricted stock units that were granted at the time of our IPO, which accounted for a decrease of $64.9 million. The remaining increase in general and administrative expense was driven by an increase in centralized costs to support the facility operations.

Current wording

General and administrative expense increased by $13.6 million, to $112.3 million for the three months ended March 31, 2026, compared to $98.7 million for the three months ended March 31, 2025. This increase was primarily due to an increase in salaries and wages of $11.4 million due to growth in operations and an increase in stock- based compensation expense recognized during the quarter which accounted for $8.1 million of the increase. The increase in general and administrative expense was partially offset by a decrease in professional fees, including a decrease of $11.0 million in legal expenses associated with the Audit Committee’s independent investigation during the year ended December 31, 2025 and with ongoing government investigations. The remaining change in general and administrative expense was spread out over various expense types.

Previous wording

Depreciation and amortization increased by $3.9 million to $14.4 million, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. This increase is directly attributable to new real estate obtained through acquisitions.

Current wording

Depreciation and amortization increased by $5.4 million to $18.1 million, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. This increase is directly attributable to new real estate obtained through acquisitions.

Previous wording

Other (expense) income, net was $(10.0) million for the three months ended September 30, 2025, a decrease of $20.7 million compared to other income, net of $10.7 million for the three months ended September 30, 2024. Other (expense) income, net consists of interest expense which decreased by $0.5 million, to $8.5 million for the three months ended September 30, 2025. Additionally, other (expense) income, net changed from income of $19.7 million to expense of $1.4 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2025, driven by an increase in unrealized gains on our investment in partnerships during the three months ended September 30, 2024 with no comparable gains during the three months ended September 30, 2025.

Current wording

Total other expense, net was $6.3 million for the three months ended March 31, 2026, an increase of $0.9 million compared to $5.4 million for the three months ended March 31, 2025. Total other expense, net consists of interest expense, which decreased by $0.5 million, to $6.4 million for the three months ended March 31, 2026. Additionally, other income, net decreased $1.4 million from $1.5 million for the three months ended March 31, 2025 to $0.1 million for the three months ended March 31, 2026, driven primarily by a decrease in unrealized gains on our available for sale securities, partially offset by an increase in unrealized gains on our investments in partnerships.

Previous wording

Provision for income taxes totaled $24.0 million for the three months ended September 30, 2025, representing an effective tax rate of 31.4%, compared to a provision for income taxes of $17.4 million and an effective tax rate of 51.8% for the three months ended September 30, 2024. The change in effective tax rate in the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was primarily due to the change in forecasted pre-tax book income. See Note 10 “Income Taxes”, in our condensed consolidated financial statements for more information.

Current wording

Provision for income taxes totaled $33.1 million for the three months ended March 31, 2026, representing an effective tax rate of 29.1%, compared to a provision for income taxes of $14.4 million and an effective tax rate of 33.6% for the three months ended March 31, 2025. The change in effective tax rate in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to the change in forecasted pre-tax book income and the impact of excess tax benefits from stock-based compensation. See Note 11 “Income Taxes”, in our condensed consolidated financial statements for more information.

Previous wording

Prior to our IPO, our liquidity was generally derived from our cash flows from operations, mortgage loans (including both Housing and Urban Development (HUD)-insured and non-HUD mortgage loans), and credit facilities maintained with commercial banks.

Current wording

Our liquidity has generally been derived from our cash flows from operations, mortgage loans (including both Housing and Urban Development (HUD)-insured and non-HUD mortgage loans), credit facilities maintained with commercial banks, and equity offerings.

Previous wording

As of September 30, 2025, we had cash and cash equivalents (which include short-term investments with original maturities of three months or less at the time of purchase) of $355.7 million. The total principal amount outstanding under our Amended and Restated Credit Facility as of September 30, 2025 was $100.0 million. In addition, we had outstanding letters of credit of $13.9 million as of September 30, 2025.

Current wording

As of March 31, 2026, we had cash and cash equivalents (which include short-term investments with original maturities of three months or less at the time of purchase) of $248.0 million. The total principal amount outstanding under our Amended and Restated Credit Facility as of March 31, 2026 was $45.0 million. In addition, we had outstanding letters of credit of $7.9 million as of March 31, 2026.

Previous wording

The terms of the Amended and Restated Credit Facility permit optional prepayments from time to time without premium or penalty. We expect to continue to use the Amended and Restated Credit Facility, subject to entrance into teh agreement described above, as our single line-of-credit and to fund the potential acquisition of additional property and operations, as well as for working capital and for general corporate purposes. Cash paid to fund real estate acquisitions was $80.6 million for the nine months ended September 30, 2025, compared to $224.8 million, for the nine months ended September 30, 2024.

Current wording

The terms of the Amended and Restated Credit Facility permit optional prepayments from time to time without premium or penalty. We expect to continue to use the Amended and Restated Credit Facility as our single line of credit and to fund the potential acquisition of additional property and operations, as well as for working capital and for general corporate purposes. Cash paid to fund real estate acquisitions was $86.5 million for the three months ended March 31, 2026, compared to $0 for the three months ended March 31, 2025. Total cash paid for capital expenditures for property and equipment were $21.8 million and $17.7 million for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Net cash provided by operating activities for the nine months ended September 30, 2025 of $407.6 million increased by $104.9 million as compared with the same period in 2024. The increase was driven by an increase in operational performance across our existing portfolio of facilities as well as the incremental operational performance across our net 44 facilities acquired since September 30, 2024. This increase was further driven by an increase in cash flows from the change in operating assets and liabilities of $22.3 million due primarily to the timing of accounts receivable collections as well as the timing of payables and other accrued liabilities. The impact of collections to net income is driven by growth in operating facilities period-over-period, supported by a decrease in days sales outstanding of 7.4, from 57.8 as of September 30, 2024 to 50.4 as of September 30, 2025. This change in days sales outstanding is due to operational efficiencies as facilities continue to mature following facility ownership transition.

Current wording

Net cash provided by operating activities for the three months ended March 31, 2026 of $236.3 million increased by $86.1 million as compared with the same period in 2025. The increase was driven by an increase in operational performance across our existing portfolio of facilities as well as the incremental operational performance across our net eight facilities acquired since March 31, 2025. This increase was further driven by an increase in cash flows from the change in operating assets and liabilities of $13.7 million due primarily to the timing of accounts receivable collections as well as the timing of payables and other accrued liabilities. The impact to collections is driven by growth in operating facilities period-over-period, supported by a decrease in days sales outstanding of 5.4, from 53.9 as of March 31, 2025 to 48.4 as of March 31, 2026. This change in days sales outstanding is due to operational efficiencies as facilities continue to mature following facility ownership transition.

Previous wording

Investing cash flows consist primarily of capital expenditures, investment activities, proceeds from sale of property and equipment and cash used for acquisitions.

Current wording

Investing cash flows consist primarily of capital expenditures, investment activities, and cash used for acquisitions.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2025 of $145.9 million decreased by $192.5 million as compared with the same period in 2024. The decrease in cash used was attributable to a decrease of $144.2 million in the acquisition of facilities, a decrease of $29.8 million in purchases of investments consisting of holdings in investment grade bond mutual funds, and a decrease of $30.4 million used for the investment in partnerships during the nine months ended September 30, 2025 compared with the same period in the previous year. This reduction was offset by an increase of $12.4 million in cash used to purchase property and equipment in excess of cash used for these purposes in the nine months ended September 30, 2024.

Current wording

Net cash used in investing activities for the three months ended March 31, 2026 of $127.0 million increased by $110.5 million as compared with the same period in 2025. The increase in cash used was attributable to an increase of $86.5 million in the acquisition of facilities, an increase of $20.1 million in purchases of equity securities held by our consolidated captive insurance entity, and an increase of $4.1 million in cash used to purchase property and equipment in excess of cash used for these purposes in the three months ended March 31, 2025.

Previous wording

Financing cash flows consist primarily of payments and draws on lines of credit, distributions and repayment of short-term and long-term debt, borrowings on lines of credit, proceeds from equity offerings, contributions from noncontrolling interest, and proceeds from equity offerings.

Current wording

Financing cash flows consist primarily of payments and draws on the line of credit, distributions and repayment of short-term and long-term debt, borrowings on the line of credit, contributions from noncontrolling interest, and proceeds from equity offerings.

Previous wording

Net cash used in financing activities for the nine months ended September 30, 2025 was $63.5 million, an increase of $42.4 million as compared with the same period in 2024. During the nine months ended September 30, 2025 we had reduced financing activity consisting primarily of net payments on long-term debt and our line of credit of $12.7 million and $42.0 million, respectively, and taxes paid related to net share settlement of equity awards of $8.4 million. In contrast, during the nine months ended September 30, 2024, we had net payments on our line of credit of $520.0 million and net borrowings on long-term debt of $56.3 million. During the same period in 2024, we also had proceeds from our initial public offering of $414.2 million and proceeds from our underwritten follow-on offering of $95.3 million, offset by dividends paid of $33.7 million and taxes paid related to net share settlement of equity awards of $33.6 million.

Current wording

Net cash used in financing activities for the three months ended March 31, 2026 was $67.7 million, an increase of $63.6 million as compared with the same period in 2025. During the three months ended March 31, 2026 we had increased financing activity consisting primarily of net payments on long-term debt and our line of credit of $1.4 million and $55.0 million, respectively, and taxes paid related to net share settlement of equity awards of $10.7 million. In contrast, during the three months ended March 31, 2025, we had net payments on our long-term debt of $4.1 million, and no activity on the line of credit.